Agents Say Farmers Group Cut Their Throats

LOS ANGELES (CN) – Farmers Group insurance cuts its own agents’ financial throats by taking information from them and using it to offer their customers lower rates through a subsidiary, the United Farmers Agents Association claims in court. The association, a California corporation with members nationwide, sued Farmers Group Inc. and five affiliates, which the association describes as shell entities managed by Farmers. The association claims Farmers “began a campaign of systematic tortuous interference with its agents’ business relationships and expectancies” in 2009, after Farmers bought the 21st Century Insurance Group, which is not a party to the complaint. “21st Century is a direct writer of insurance, including car insurance and homeowners insurance, among others,” the complaint states. “As a direct writer and unlike the traditional agent-based model typically employed by the Farmers Insurance Group of Companies, 21st Century does not rely on agents to sell its insurance products; instead, it markets and writes policies directly to consumers. “By employing a direct writer approach, 21st Century can offer insurance at low rates which undercut the rates being charged to the agents’ own customers and policyholders.” The association asks the Superior Court to order Farmers (GFI) to comply with contracts the independently contracted agents signed before and during 2009. “On or around 2009, FGI initiated a campaign of systematic tortuous interference with its agents’ business relationships and expectancies,” the complaint states. “Under this scheme, FGI utilizes information and data about the agents’ policyholders – information and data acquired by the agents through agents’ efforts – to directly solicit those agents’ existing policyholders with less expensive insurance policies sold through a subsidiary of the exchanges. “FGI’s tortious interference has caused, and continues to cause, agents to lose current and prospective policyholders, to the detriment of the agents. “Ironically, and as further set forth herein, FGI’s conduct hinders agents’ efforts to comply with arbitrary and unfair performance standards that FGI began imposing shortly after the initiation of its tortious interference campaign. “On or about 2010, FGI unveiled a series of programs requiring all of its agents to meet various performance standards – most notably, unreasonable production minimums, quoting requirements, and office hours – or else face adverse action from FGI up to and including termination. “These new programs were unlike any past programs, in that they impose explicit production minimums upon agents without their consent; irrespective of an agent’s past performance; and without regard for whether an agent even markets and sells the particular type(s) of insurance required to be marketed and sold under the various programs. “FGI has used and continues to use these programs as a basis for taking disciplinary and other action against agents, including termination, in violation of the contracts, which do not contain any provision requiring agents to meet performance standards of any kind. “FGI has also taken adverse action against agents on the basis of the location, type, and nature of the offices maintained by agents, including termination, notwithstanding the fact that, in all instances, the offices maintained by the agents were fully consistent with the contract.” The reason for all this is obvious, the association says: “FGI can generate higher management fees and in turn, greater profits – by selling insurance directly through 21st Century rather than through the agents.” The complaint continues: “Ironically, while FGI continues to wrongfully require its agents to meet production minimums through illegal programs, as further explained in the sections that follow, it simultaneously engages in systematic conduct designed to deprive those same agents of their existing customer base, to the detriment of the agents. “FGI is motivated to pressure its agents to quote new business, in part, so that FGI can then harvest tile data obtained through the agents to solicit new customers for 21st Century without any resulting benefit to the agents.” The association claims Farmers used the amended 2009 contracts to rank agents based on how many contacts and quotes they notch each day. It claims these programs are a pretext for firing agents and taking away their client books. “Termination has devastating consequences for agents; not only do they lose their ability to sell insurance for the Farmers Insurance Group of Companies, but also in most cases, they lose their entire book of business, which FGI claims as its own and which FGI vigorously protects with non-competition provisions,” the complaint states. Agents may spend decades building a book of clients, only to see it snatched away, the association says. Named as defendants are Farmers Group, Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance, and Farmers World New World Life Insurance. Farmers Group’s parent company Zurich Insurance is not a party to the lawsuit. United Farmers Agents Association is represented by Paul Mahoney, with Mahoney & Soll, of Claremont. The group’s spokesman, Mark Toohey, disputed the allegations of the complaint. “Farmers Insurance strongly disagrees with the issues raised in this lawsuit and we take great pride in the strong relationship we have built with our agents during Farmers’ nearly 85-year history,” Toohey said.